Matt

Update from MK Cycles in Bulawayo, Zimbabwe

Nov 212011

We were lucky enough to have Milton join us for our several days in Gaborone. He has an uncle who lives in Gabs and travels back and forth so he’s able to make the trip quite easily. It was great to see him and check in after his first year of operating. From the beginning, we knew Milton was special and we had high hopes for his shop. In the first year, he has not disappointed! He has successfully sold through his first container, and has been working closely with Rob and Terry of Bicycle Recycle to stay restocked. He has so far taken several additional bike deliveries from the Gaborone warehouse, and he combined his visit with us with a buying trip. He and Rob selected the 40 bikes from what remains of the last container, and we loaded “The Beast” for Milton’s return trip. He also has a previous 40-bike order waiting at the Zimbabwe border and will use the Beast to get those up to Bulawayo as well. He pays on time, and he is careful with what he orders – enough to service his customers, but not so much that he gets overloaded. He’s very happy to have good stock going into the holiday season, which, like everywhere else on the globe, is good for retail businesses.

In addition, Milton has formed a cycling club to get some of the local youth involved in the sport, and he has spoken with the Zimbabwe Cycling Association about getting some of these guys hooked up with the national team. If you remember from last year, we met two of his local racers, PK and Nkulumo. Nkulumo has replaced PK as the local fast guy, and has gained so much notoriety that he has been lured away to another team. Milton is certain he can get him back…

After getting the overall report, our first question was whether “Precious” ever got his bike. (Precious was our favorite Bulawayo police officer – find out more by reading back to the Zimbabwe posts from last year.) Milton confirmed that Precious had indeed finally saved up enough cash, and is currently the proud owner of a sweet new ride. All the other cast of characters are doing well – Big Mike is still helping out Milton with the more difficult repairs, and Milton his returning the favor by supplying him with spare parts. The Joiner did finally finish the shop and while we are still waiting for pictures, we hear it looks great.

MK Cycles has done so well, in fact, that Milton came to us with a proposal to add new locations. He requested help in adding a store near Victoria Falls and one on the capital city of Harare. We all discussed it in detail over several days and decided to focus first on Harare because the market there is much larger and much more in need. It fits better with the mission of the Foundation to get bikes in the hands of Harare residents who really need them, rather than the tourists visiting Vic Falls. We’ll keep you updated as those plans progress, but we think Milton is poised for much success in his future.

You Can't Win 'em All

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Nov 172011

It is with much disappointment and sadness that we announce the closure of JonMol Cycles in Gaborone. JonMol, operated by Bones, was our first Sister Shop, opened in 2008. JonMol has struggled since its inception, plagued by high rent and a lack of dependable resupply (an issue we feel we’ve now solved with our relationship with Bicycle Recycle). In addition to these challenges, the required financial reporting on the business was rarely submitted to us, and the information we did get was not completely honest, so it was difficult to help Bones navigate through tough times. While he was occasionally able to get some resupply from ProBike in S. Africa, he was rarely in a financial position to do so. Over the last couple years, not wanting to see our first Sister Shop fail, we sent him two more containers with the agreement that he would repay us the freight after selling some of the stock. Rob Carle entered the picture and also began to give Bones assistance on the ground – both financially and with advice. Unfortunately, the situation did not improve. When we arrived in Gaborone a couple days ago, we started to learn how bad the situation really was. JonMol had very little stock, no cash to buy more, incomplete or nonexistent financial records, and increasing debt. We decided that we had thrown enough good money after bad, and made the difficult decision to close the shop. We knew there were serious risks going into this and I think the overall success speaks for itself. Even in this situation, when the shop has failed, we, and you, still put almost 2000 bikes into the hands of the local community, which is a success by any measure.

But we’re not the type of guys to resign ourselves to failure. We sat down with Jerry Kokwane, one of Bones’ employees and discussed how we could set him up in a less risky, more manageable situation. So out of the ashes of JonMol, Jerry’s Bikes rises! As Rob moves his distribution warehouse to a larger location to serve the four Sister Shops, Jerry will set up shop in Rob’s existing space. With Guta, JonMol’s top mechanic, at Jerry’s side, they have already started putting the pieces together to form this new business. There are three key differences in how Jerry’s Bikes will be run, which we believe give it the best chance for success. The first is low overhead. The rent on Jerry’s space will be shared by Jerry’s Bikes and Bicycle Recycle, so a slow period of sales won’t have as drastic of an effect as before. The second is that Jerry’s Bikes will start out using our new distribution model, so resupply is much more manageable, predictable and affordable. And the third is the proximity to Bicycle Recycle. We can only provide so much training and advice from 12,000 miles away. With Jerry’s Bikes and Bicycle Recycle so close to each other, small issues can be sorted out before they become large issues, and communication back to us in California will be much improved.

While we are saddened by the closure of JonMol, the experience has taught us valuable lessons about doing this work in Africa, and how to prevent a situation like this from developing again. At the end of the day, these Sister Shop micro-businesses are businesses like any other – and sometimes, businesses fail. It’s very important, especially in the context of philanthropy work, to be able to publicly acknowledge the failure of a project, and pull the plug. The JonMol project was a success, but failed in its quest to achieve the holy grail of self-sustainability. We feel that the new setup with Jerry’s Bikes provides a much better chance of reaching that goal, and we couldn’t be more excited about Jerry’s opportunity. No matter what happens, we remain committed to the cause of creating a sustainable supply of bikes to these communities, and this turn of events only strengthens our resolve and improves our chances for success.

The Robin Hood Model

Bicycle Recycle Distribution 1 Response »

Nov 162011

If you remember, one of the major goals of this trip was for us to get a better understanding of what Rob and Andrew are dealing with in the South African market and then to see the new Sister Shop distribution operation in Gaborone. We spent a couple days in Joburg, traveling around to bike shops and meeting with their owners. Through this process, we understood why Rob and Andrew are so keen on being a distributor, there’s a huge opportunity to supply that market with products that are less expensive or higher quality than what’s currently available, as well as some products that are not available at all. The combination of our market position and the existing flow of containers to the region gives Bicycle Recycle a huge competitive advantage. There are two main issues with the high-end bike market in S. Africa, the biggest being the lack of consistency in supply. It is very common for the entire country to be out of basic items like Shimano SPD pedals or 29” tubes. The other issue is that parts are very expensive due to the expense of transporting goods there. There is typically one distributor for each brand in the country, and they are generally very poorly run. They bring in a container of stuff and the country is flush for a bit, then they run dry for months while the distributor waits for more product. With our assistance, Bicycle Recycle feels they can beat their competition in both of these situations. So after spending this last week with Rob, we feel we’ve come up up with a pretty cool distribution model that is sustainable and achieves multiple goals.

Bicycle Recycle will receive our containers of donated bikes and warehouse them in Gaborone. They will serve as the distributor for our Sister Shops and “sell” them bikes. The price the shops will pay to Bicycle Recycle covers the cost of shipping the bikes from California to Gaborone, plus the import duties, which comes to about $40 per adult bike. The markets where we have shops can typically afford $50 – $150, so this pricing model works well. Bicycle Recycle will also assist the Sister Shops in getting new bikes and parts from ProBike. The problems of transport and payments are solved by the involvement of Bicycle Recycle – they front the money to ProBike and they transport on their own trucks. These new bikes will supply a growing “middle class” that can afford $200 – $500 for a bike – a market that is crucial for the success of the Sister Shops. By combining the needs of all the shops, Bicycle

Recycle can get ProBike to cooperate and supply their Gaborone warehouse. These bikes and parts are then passed through to the Sister Shops with no additional mark up. You might be asking what’s in this for them, and why they would go to such trouble and expense for us. For one, they just truly believe in the Sister Shop project and they want to help it succeed. But also, they’re now the BikeSmart distributor for South Africa. They feel that our line of accessories could be very successful there, so they will be selling it to shops across the country. They already have placed it in two high-end shops in Joburg and Cape Town, and so far the shops are very happy with it. We are also working with a couple of our vendors in the US who don’t have any distribution in S. Africa. Through our relationship with Wilier, Bicycle Recycle is also now the exclusive S. African distributor for one of the best bike brands in the world. We will continue to help Bicycle Recycle build out a portfolio of brands that will be among the best in the country, and in exchange we achieve our goal of creating a sustainable supply chain of bicycles to a part of the world that could really benefit from it. Pretty cool, huh?

The Birth of Bicycle Recycle

Bicycle Recycle Distribution, Sister Shops in Africa No Responses »

Nov 162011

If you’ve been following our project for a while, you know that we have set up three Sister Shops in Botswana, Namibia, Zimbabwe, and have plans for a fourth in Lesotho. While it was a difficult task to get these shops up and running, it was fairly straight forward – we pack a container full of bikes, ship it over, and then we meet it there and get a shop set up. After doing this three times, I feel we have it down, although there are always new challenges. One thing to note is that this project would be impossibly more difficult if weren’t for the incredible generosity of our customers and vendors! But now that the shops are up and running and have sold through

their initial container load, they have found it very difficult to get resupplied. We have been creative in attempting to resupply them ourselves, but given the lead time and the fact that we can only send a 40’ container, it’s just not a reasonable or manageable solution. We’ve worked with BEN Namibia to get some bikes to MakVeto, we’ve sent three total containers to JonMol in Botwsana, and now MK Cycles in Zimbabwe has sold through its initial container. While there is a distributor in S. Africa called ProBike that can supply these shops with parts and bikes, they don’t really want to deal with these countries, especially for small resupply orders, and the logistics of transporting and paying for the orders are daunting. This is a huge problem and a threat to the future sustainability of our Sister Shops. Remember, our ultimate goal is for these shops to be profitable and grow without any outside financial help or further philanthropy required.

So what do we do about this resupply issue? We originally thought the supply chain from S. Africa would be able to support our shops, but that’s not the case. That’s where the Carle brothers enter the picture. Rob and Andrew Carle own a freight company, GMR Freights, based in Johannesburg and Gaborone (capital of Botswana) and they transport goods all over southern Africa. And they just happen to be obsessed with cycling! Rob is based out of their Gaborone office and that’s where our relationship started. He heard there was a new shop in town and went to check out JonMol. He met Bones and Jerry and very soon became their best customer. As their relationship grew, Rob provided a lot of assistance to JonMol and was very interested in helping the shop be successful. We met Rob when he helped us deal with a container destined for Gaborone that was literally sliced open by a forklift operator en route to JonMol. Rob’s expertise in dealing with this process was invaluable. If it weren’t for him, that container would still be sitting at the port in South Africa with its guts spilling out…

At the same time that all of this was happening, Rob and Andrew were growing increasingly frustrated with the supply of high end bikes and parts in South Africa and Botswana. So much so that they began exploring options for importing and distributing themselves. There are two major obstacles in the distribution business – one is the access to product and the other is the logistics of moving those products to where they need to be. As a successful freight company, the movement of product is not an issue and as for access to product, that’s where Mike’s Bikes comes in.

We have access to almost everything the bike industry produces. And since we already have containers going from California to southern Africa, and since we need help supplying our Sister Shops, there are some obvious synergies. So several months ago, we tried an experiment. Rob set aside some warehouse space in Gaborone and we sent him a container of bikes and some basic spare parts needed by the Sister Shops. Also in the container was a decent amount of our BikeSmart line of products. Rob agreed to warehouse the donated bikes and parts and supply our Sister Shops, in exchange for us allowing him and Andrew to begin selling BikeSmart into higher end shops in South Africa. He affectionately called it the “Robin Hood” model. If they can sell enough quality products to shops in South Africa, they can cover their costs on supplying our Sister Shops. Rob even took one of his old Land Cruisers, which we’ve named “the Beast”, and repurposed it as the Mike’s Bikes Sister Shop Distribution Vehicle! With the trailer, it can deliver 40 bikes to almost anywhere in southern Africa. So far it has delivered two loads of bike and parts to MK Cycles in Zimbabwe, and two loads to MakVeto in Namibia. And with JonMol just around the corner, supplying them is a snap. The experiment worked and Bicycle Recycle was born!

Tumi's Plan

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Nov 142011

In the past, our Sister Shop plan was pretty simple. Once we selected an entrepreneur, we would collect enough bikes to fill a container and ship it. Then we time our trip to Africa to hopefully coincide with the container arrival (not an easy task). While there, we would organize the container delivery, unload the container, work on the bikes, build the shop and train the shop owner. This was all crammed into a week or so, which was obviously a huge logistical challenge and in retrospect, not the best way to do it. But with our families back home, not to mention our jobs at Mike’s Bikes, we just couldn’t afford more time away. This is why we’re so excited to be partnered with Bicycle Recycle, who will be providing distribution support. With them providing a huge amount of logistical assistance, we can focus our time and energy on developing our entrepreneurs in best business practices and mechanical expertise. Also, our old way of opening these shops, what we affectionately call Sister Shop 1.0, presented huge challenges to the local entrepreneurs. Trying to figure out how to handle a container full of 500 bikes is a daunting task for a brand new business owner, as is the psychological and accounting leap required to transition from the first load of “free” bikes to the more sustainable model of buying bikes to cover their shipping and duty cost.

So for the Lesotho shop, we sat down with Tumi and created an opening budget, which included a certain amount of bikes from Bicycle Recycle. This time, we’ll give Tumi the money to set up his store and to buy his opening inventory. This has two main benefits, the first being he can order an appropriate amount of bikes based on his space, and it gets him in the habit from Day 1 of paying a cost for the bikes. The idea that the business needs to conserve enough of its sales revenue to purchase more inventory is a concept that some of our guys have struggled with. We hope our new method will make that idea easier to conceptualize and follow.

It’s important to note that our friends at Bicycle Recycle are not making any money off of this model and, in fact, they have donated a considerable amount of their own time and money to set up a specific delivery network to all of our shops. The money they receive for the bikes helps cover the cost of shipping the container, unloading and storing the bikes, and delivering them to the shops. They believe in the project as much as we do and are committed to helping our guys succeed. Again, more info about our relationship with them to come…

As for Tumi’s actual store, we decided that two 20’ containers in an L shaped configuration would work best. On the fenced-in property, there is a large bushy tree that will provide great shade for the shop. The tree will be right at the corner of the “L” and Tumi will also install a triangular canopy between the two containers for additional shade. He can source the containers locally and that is included in our budget. Another change from Sister Shop 1.0 to 2.0 is the idea of an Opening Budget. In the past, we arrive with a bunch of cash to buy materials, hire workers (remember the Joiner from last year, we’re still not sure if he ever finished…), etc. Our Sister Shop owners often had no idea how much was spent getting their store open and never had to deal with working within a budget. Tumi will be given his budget and it’s up to him to find the best deals, weigh all his options, and make his own purchase decisions, providing valuable experience with deciding how to best spend each dollar (or Rand or Maluti). We also included in the budget funds for modifying the container with a door, window, and all the interior furnishings required for a functioning bike store. The plan is for Tumi to have his shop completed before we go back next year to complete his training and get him fully up and running. We are confident this will happen on time based on the results of his first task. Before we left him, he had a list of items to complete before we’d give him any money – register his business with the government, receive clearance from the local Chief, open his bank account, etc. By the time we arrived in Joburg, we received this email from him:

Sent: Wednesday, November 2, 2011 2:07 PM

Subject: given fast service because i’m the star of the country

Hi Ken and Matt?

you can’t believe that i have opened an account and registered the business so they ask me to collect the license next week, at least i reduced my work before the next race.

And to think we had our fingers crossed that he would get this much done within the first month…

The rest of Tumi’s budget includes a basic laptop and 3G stick, a small office area, a starting marketing budget, work bench, proper tools, electricity to the container, installing lights and outlets, bike storage racks, shelving, an opening order of bikes, parts, and accessories, and a big sign to advertise on his busy road. We plan to visit Tumi at some point next year to finish up his training, work with him in the shop, and look for areas where he can improve and grow. In the meantime, we’ll be in constant contact with him as the shop is completed, the containers are placed, etc. One requirement we have of all Sister Shops is regular communication and reporting on the health of the business. These guys have no business or accounting experience, so this is an area where we leverage our experience to help guide them to success. With our help, Tumi will develop his monthly operating budget, assign himself a salary, and start to make decisions on how many staff to hire, where to advertise, etc.

We’re really excited about this new model, and we’re confident that it will give Tumi a much better chance at success and provide a blueprint for future Sister Shops.

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